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PayPal Holdings Inc.’s profit tripled in the fourth quarter as the company capped off what Chief Executive Dan Schulman called the strongest quarter in its history, fueled by accelerated adoption of digital payments during the pandemic.
Shares rose 5.5% in after-hours trading Wednesday.
The company reported net income of $1.57 billion, or $1.32 a share, up from $507 million, or 43 cents a share, in the year-earlier period. PayPal’s PYPL, +1.12% GAAP earnings per share for the latest quarter included a 60-cent net gain from strategic investments.
On an adjusted basis, PayPal earned $1.08 a share, which came in ahead of the FactSet consensus, which called for $1.00 a share.
PayPal generated $6.12 billion in revenue for its December quarter, up from $4.96 billion, while analysts were expecting $6.09 billion. This marked the first period in which PayPal reported upwards of $6 billion in quarterly revenue.
The company’s total payment volume (TPV), or the value of transactions made across the platform, rose to $277 billion from $199.4 billion, while analysts were calling for $267.9 billion. Venmo’s TPV rose 60% to $47 billion, whereas the FactSet consensus was for $46.6 billion.
During the busiest moments at the height of the holiday shopping season, PayPal was processing over 1,000 transactions a second, Schulman told MarketWatch, a record statistic for the company.
PayPal added 16 million net new active accounts in the latest quarter, bringing its total active accounts to 377 million, including 29 million merchant accounts. Venmo active accounts rose 32% to 70 million.
The company made a series of product launches toward the end of the year, including allowing U.S. users to buy, sell, and hold cryptocurrencies through its platform. Those customers who’ve purchased cryptocurrencies through PayPal have been logging into their accounts twice as frequently as they did before, the company said.
Another relatively new product, a buy-now-pay-later offering that lets customers split purchases into either three or four installments, depending on region, generated $750 million in total payment volume in the latest quarter.
“When you look at kind of the scale or you look at the value proposition [or] the take-up of merchants that’s continuing on into the first quarter, this is clearly a home run for us, and a winner,” Schulman said on PayPal’s earnings call.
Over the course of 2020, PayPal made progress in its efforts to grow in-store transactions through features like physical Venmo cards, QR codes, and tap payments. The company now has 600,000 merchants who accept PayPal and Venmo QR codes, including CVS Health Corp. CVS, +1.96%, Nike Inc. NKE, -0.69% and Five Below Inc FIVE, +0.56%.
Nearly 10 million PayPal customers conducted in-store payments through the service in some capacity during 2020, according to Schulman, accounting for over $20 billion in total payment volume.
“All these new products and services are really transforming PayPal from a checkout solution to a full super-app, or a digital wallet that transcends payments, financial services, and commerce and shopping tools,” he said.
For the first quarter, PayPal expects revenue to grow 28% at current spot rates, or 26% on a currency-neutral basis. The company also anticipates adjusted EPS growth of about 50%.
Analysts surveyed by FactSet were modeling $5.62 billion in March-quarter revenue, up from $4.62 billion a year earlier, and 99 cents in adjusted earnings per share, up from 66 cents a year earlier.
Looking at the whole of 2021, PayPal anticipates TPV growth in the high 20-percent range. The company models revenue growth of 19% at current spot rates and 17% on a currency-neutral basis to about $25.5 billion. It also expects 17% growth in adjusted earnings per share and 50 million net new active accounts for the year.
The FactSet consensus called for $1.15 trillion in total payment volume, $25.43 billion in revenue, and $3.12 a share in adjusted earnings for the full year.
PayPal’s earnings outlook for 2021 accounts for “ongoing elevated levels of organic investment” in the business as the company tries to capitalize on a period in which Chief Financial Officer John Rainey argues that “the structural tailwinds for PayPal have never been stronger.”
Wolfe Research analyst Darrin Peller wrote that the expectation for 50 million net new active accounts came in significantly above his own prior projection for 35 million, helping to highlight a “new norm” for the company. “We see the [net-new active] guidance as key given concerns among some investors that the [over 70 million] added in 2020 was a pull-forward and would cause a material retrenchment in 2021,” he wrote, while reiterating an outperform rating on the stock.
Shares of PayPal have gained 40% over the past three months as the S&P 500 SPX, +0.10% has risen 17%.
